A recent report from the Canadian American Business Council, conducted by Oxford Economics, has highlighted the potential repercussions of a breakdown in the Canada-U.S.-Mexico Agreement (CUSMA) on job markets and economies in both countries. The report outlined three possible outcomes of the ongoing trade discussions between the U.S. and Canada: the maintenance of current tariffs, the failure of CUSMA, and a successful renegotiation leading to improved trade relations.
In the event of CUSMA’s termination, the report projected substantial job losses of 214,000 in the U.S. and 102,000 in Canada compared to the status quo. Conversely, successful renegotiation could result in job gains of 137,000 in the U.S. and 98,000 in Canada. The CEO of the Canadian American Business Council, Beth Burke, emphasized the significance of the trading partnership between the two nations for their mutual prosperity.
Beyond employment impacts, the report predicted significant GDP losses in both countries in the breakdown scenario, with the U.S. facing a $1.04 trillion US decrease and Canada a $271 billion Cdn decline by 2035. Inflation rates would likely rise in the short and long term, while real disposable income growth, particularly in Canada, would be hindered. Conversely, successful negotiations could lead to increased disposable income, lower inflation, and substantial GDP growth for both nations.
The report highlighted potential industry-specific vulnerabilities, indicating that manufacturing sectors, including auto, wood, and metal production, would be severely affected in the worst-case scenario, impacting regions like Iowa, Michigan, Kentucky, and Alabama in the U.S., as well as manufacturing hubs in Quebec and Ontario in Canada.
As the deadline for new tariffs approaches, trade representatives are actively working to reach a deal to avert the imposition of additional tariffs on Canadian exports. Trade Minister Dominic LeBlanc and U.S. Trade Representative Jamieson Greer are engaged in discussions to present a possible agreement to President Donald Trump before the deadline. Burke stressed the necessity of concessions from both sides for a successful negotiation outcome.
In case a deal is not reached, the imposition of new tariffs is expected to have a significant impact on manufacturers in central Canada, particularly in sectors like cement, paper, wood, computers, electronics, plastics, and rubber. The report indicated that provinces like Ontario, New Brunswick, and Quebec would be most affected due to their reliance on these industries, while provinces like Saskatchewan, Alberta, and Newfoundland and Labrador could be relatively less impacted.
Overall, the ongoing trade talks and potential outcomes underscore the critical importance of the trade relationship between the U.S. and Canada for economic stability and job growth on both sides of the border.
